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Alibaba Makes It Clear - Stores Are A Retailing Necessity

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If there was ever any doubt about the relevancy of the store in the 21st century, by now those doubts should have been removed.

In 2017, we were relentlessly subjected to clickbait about the “Retail Apocalypse.” It was tiresome, and a couple of weeks ago, the Pitney-Bowes (R)evolution users’ group conference marked the first anniversary of research and advisory firms RSR and IHL Services, in the persons of me (for RSR) and Greg Buzek (for IHL) calling the businesslike equivalent of BS on stage in a panel discussion. We really haven’t stopped since.

Now, if the only thing that clickbait did was gather readership numbers for the author(s), it would be annoying, but non-destructive.However, all actions have consequences and the “apocalypse” story has been no exception.It scared the heck out of retailers and stock analysts. Amazon approaches a trillion dollar valuation (seriously??) and other retailer stocks are somewhat depressed. It led to dueling numbers around the number of store openings vs. the number of store closings. I tend to believe IHL’s numbers, which said that excluding department stores, there were more openings than closings over the course of the year. Others might have a different subset of data.

Today, the “apocalypse” nonsense is mostly in our rear view mirror, replaced by the far less destructive, but not much less hyperbolic “Retail Renaissance.”There are all kinds of articles written about the next generation of stores.

I don’t see any of this as a “renaissance.”It’s more like “the Retail Evolution.”

Stores are no longer end-points on the supply chain, they’re active participants. That costs money, and re-jiggering of processes and technology to support store-based shipments to customers, and single item shipments to stores for customer pick-up.And we won’t even get into returns into stores of items bought on line.What a mess!

But let’s be clear, pure play retailers are moving to brick and mortar locations just as they did in the early 2000’s when the first bubble burst . Consider the following:

  • We ran a study on Retail Disruptors with JDA late last year.It turned out that “disruptors” were more likely to operate stores than their less disruptive counterparts.I always use the example of Warby-Parker. Starting out as a pure play, the company is now opening stores in relevant areas.They seem to be doing well.
  • The big name in the US was Amazon buying Whole Foods (and the somewhat silly predictions of what the company was going to do with those 470+ locations), but in trying to decide what to write about this week, I stumbled on a very surprising fact, that I just didn’t know.
  • Chinese eCommerce giant Alibaba ALSO has stores. I found this article in Investor’s Business Daily that detailed a surprising three year progression of brick and mortar acquisitions the company has made.An electronics retailer, supermarkets (in fact, the largest operator of supermarkets in China, rather than the rather tiny slice of the pie that Whole Foods Market has in the US), and last year it started building its own supermarkets as well.Man, I wish I knew that when I was getting media calls from Europe and the US on the day the WFM acquisition was announced.The fear and loathing was, and actually remains kind of shocking.
  • Funniest of all, I think, is the way Alibaba describes what we would call its “Omnichannel” efforts.It’s called their “New Retail” strategy which “…integrates eCommerce and conventional retailing in an effort to boost sales and convenience.”You’ve got to be kidding me. That’s new?

US-based grocers, take note! In fact, stock analysts are predicting that this “new” model will actually drive equal or better margins than on-line marketplaces.Ya think?

It’s funny, in a way. For all our apparent sophistication as an industry and individuals, we seem to retain a strong streak of gullibility. Stock market analysts are no exception, and retailers always rush to satisfy their investors.

One of my tasks this weekend was to write up a Powerpoint deck for a client I am visiting this week about the CEO’s attitude around stores and store operations. I suppose the whole hour can be reduced to about eight sentences.CEO’s recognize stores will always exist. Employees make the difference, not robots. Operations have been seriously disrupted by the Omnichannel phenomenon.There’s new work to be done. Technology spends are simply going to have to rise. There’s no way around it. It’s the only way to be profitable in this new world.Shareholders are just going to have to deal with it.

Alibaba! Who knew? Clicks and bricks are the new normal.Can your chain manage in this world and remain profitable?That’s the real operational question you have to ask yourself. Clickbait be damned, that’s the real question.

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